ESCROW AGREEMENT
EXHIBIT
10.8
This
Escrow Agreement (this “Agreement”) is entered into as of July 24, 2008, by and
among Single Touch Systems Inc., a Delaware corporation (the “Parent”), Xxxxxxx
Xxxxxx (the “Indemnification Representative”) and Gottbetter & Partners, LLP
(the “Escrow Agent”).
WHEREAS,
the Parent has entered into an Agreement and Plan of Merger and Reorganization
(the “Merger Agreement”) with Single Touch Interactive, Inc., a Nevada
corporation (the “Company”), (i) pursuant to which a wholly-owned subsidiary of
the Parent will merge with and into the Company, with the Company surviving
the
merger and (ii) as a result of which the Company will become a wholly-owned
subsidiary of the Parent;
WHEREAS,
the Merger Agreement provides that an escrow account will be established to
secure the indemnification obligations of the stockholders of the Company as
of
the Closing Date, as such term is defined in the Merger Agreement (collectively,
the “Indemnifying Stockholders”), to the Parent; and
WHEREAS,
the parties hereto desire to establish the terms and conditions pursuant to
which such escrow account will be established and maintained.
NOW,
THEREFORE, the parties hereto hereby agree as follows:
Consent
of Company Stockholders.
The
Indemnifying Stockholders have, either by virtue of their approval of the Merger
Agreement or through the execution of an instrument to such effect, consented
to: (a) the establishment of this escrow to secure the Indemnifying
Stockholders’ indemnification obligations under Article 6 of the Merger
Agreement in the manner set forth herein, (b) the appointment of the
Indemnification Representative as their representative for purposes of this
Agreement and as attorney-in-fact and agent for and on behalf of each
Indemnifying Stockholder, and the taking by the Indemnification Representative
of any and all actions and the making of any decisions required or permitted
to
be taken or made by him under this Agreement and (c) all of the other
terms, conditions and limitations in this Agreement.
Escrow
and Indemnification.
Escrow
of Shares.
Simultaneously with the execution of this Agreement, the Parent shall deposit
with the Escrow Agent certificates representing 1,445,912 shares of common
stock
of the Parent, as determined pursuant to the Merger Agreement, issued in the
name of the Escrow Agent or its nominee. The Escrow Agent hereby acknowledges
receipt of such stock certificates. The shares deposited with the Escrow Agent
pursuant to the first sentence of this Section 2(a) are referred to herein
as the “Escrow Shares.” The Escrow Shares shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party hereto. The Escrow Agent agrees
to
hold the Escrow Shares in an escrow account (the “Escrow Account”), subject to
the terms and conditions of this Agreement.
1
Indemnification.
The
Indemnifying Stockholders have agreed in Section 6.1 of the Merger Agreement
to
indemnify and hold harmless the Parent from and against certain Damages (as
defined in Section 6.1 of the Merger Agreement). The Escrow Shares shall be
(i)
security for such indemnity obligation of the Indemnifying Stockholders, subject
to the limitations, and in the manner provided, in this Agreement and the Merger
Agreement and (ii) shall be the exclusive means for the Parent to collect any
Damages with respect to which the Parent is entitled to indemnification under
Article VI of the Merger Agreement.
Dividends,
Etc.
Any
securities distributed in respect of or in exchange for any of the Escrow
Shares, whether by way of stock dividends, stock splits or otherwise, shall
be
issued in the name of the Escrow Agent or its nominee and shall be delivered
to
the Escrow Agent, who shall hold such securities in the Escrow Account. Such
securities shall be considered Escrow Shares for purposes hereof. Any cash
dividends or property (other than securities) distributed in respect of the
Escrow Shares shall promptly be distributed by the Escrow Agent to the
Indemnifying Stockholders in accordance with Section 3(c) in direct
proportion to the number of Escrow Shares delivered by each Indemnifying
Stockholder.
Voting
of Shares.
The
Indemnification Representative shall have the right, in his sole discretion,
on
behalf of the Indemnifying Stockholders, to direct the Escrow Agent in writing
as to the exercise of any voting rights pertaining to the Escrow Shares, and
the
Escrow Agent shall comply with any such written instructions. In the absence
of
such instructions, the Escrow Agent shall not vote any of the Escrow Shares.
The
Indemnification Representative shall have no obligation to solicit consents
or
proxies from the Indemnifying Stockholders for purposes of any such
vote.
Transferability.
The
respective interests of the Indemnifying Stockholders in the Escrow Shares
shall
not be assignable or transferable, other than by operation of law. Notice of
any
such assignment or transfer by operation of law shall be given to the Escrow
Agent and the Parent, and no such assignment or transfer shall be valid until
such notice is given.
Distribution
of Escrow Shares.
The
Escrow Agent shall distribute the Escrow Shares only in accordance with (i)
a
written instrument delivered to the Escrow Agent that is executed by both the
Parent and the Indemnification Representatives and that instructs the Escrow
Agent as to the distribution of some or all of the Escrow Shares, (ii) an
order of a court of competent jurisdiction, a copy of which is delivered to
the
Escrow Agent by either the Parent or the Indemnification Representative, that
instructs the Escrow Agent as to the distribution of some or all of the Escrow
Shares, or (iii) the provisions of Section 3(b) hereof.
2
Within
five business days after July 24, 2009 (the “Termination Date”), the Escrow
Agent shall, automatically, without any notice required, distribute to the
Indemnifying Stockholders all of the Escrow Shares then held in escrow,
registered in the names of the Indemnifying Stockholders in direct proportion
to
the number of Escrow Shares delivered by each Indemnifying Stockholder.
Notwithstanding the foregoing, if the Parent has previously delivered to the
Escrow Agent a copy of a Claim Notice (as hereinafter defined) and the Escrow
Agent has not received written notice of the resolution of the claim covered
thereby, or if the Parent has previously delivered to the Escrow Agent a copy
of
an Expected Claim Notice (as hereinafter defined) and the Escrow Agent has
not
received written notice of the resolution of the anticipated claim covered
thereby, the Escrow Agent shall retain in escrow after the Termination Date
such
number of Escrow Shares as have a Value (as defined in Section 4 below)
equal to the Claimed Amount (as hereinafter defined) covered by such Claim
Notice or equal to the estimated amount of Damages set forth in such Expected
Claim Notice, as the case may be. Any Escrow Shares so retained in escrow shall
be distributed only in accordance with the terms of clauses (i) or (ii) of
Section 3(a) hereof. For purposes of this Agreement, a Claim Notice means a
written notification under the Merger Agreement given by the Parent to the
Indemnifying Stockholders which contains (i) a description and the amount (the
“Claimed Amount”) of any Damages incurred or reasonably expected to be incurred
by the Parent, (ii) a statement that the Parent is entitled to indemnification
under Article 6 of the Merger Agreement for such Damages and a reasonable
explanation of the basis therefor, and (iii) a demand for payment in the amount
of such Damages. For purposes of this Agreement, an Expected Claim Notice means
a notice delivered pursuant to the Merger Agreement by the Parent to an
Indemnifying Stockholder, before expiration of a representation or warranty,
to
the effect that, as a result a legal proceeding instituted by or written claim
made by a third party, the Parent reasonably expects to incur Damages as a
result of a breach of such representation or warranty.
Distributions
to the Indemnifying Stockholders shall be made by mailing stock certificates
to
such holders at their respective addresses shown on the books of the Parent
(or
such other address as may be provided in writing to the Escrow Agent by any
such
holder). No fractional Escrow Shares shall be distributed to Indemnifying
Stockholders pursuant to this Agreement. Instead, the number of shares that
each
Indemnifying Stockholder shall receive shall be rounded up or down to the
nearest whole number (provided that the Indemnification Representatives shall
have the authority to effect such rounding in such a manner that the total
number of whole Escrow Shares to be distributed equals the number of Escrow
Shares then held in the Escrow Account).
Valuation
of Escrow Shares.
For
purposes of this Agreement, the “Value” of any Escrow Shares shall be $1.25 per
share, multiplied by the number of such Escrow Shares.
Fees
and Expenses of Escrow Agent.
The
Parent shall pay the fees and expenses of the Escrow Agent for the services
to
be rendered by the Escrow Agent hereunder, which fees shall not exceed $1,000
in
the aggregate.
Limitation
of Escrow Agent’s Liability.
The
Escrow Agent shall incur no liability with respect to any action taken or
suffered by it in reliance upon any notice, direction, instruction, consent,
statement or other documents believed by it to be genuine and duly authorized,
nor for other action or inaction except its own willful misconduct or gross
negligence. The Escrow Agent shall not be responsible for the validity or
sufficiency of this Agreement. In all questions arising under this Agreement,
the Escrow Agent may rely on the advice of counsel, and the Escrow Agent shall
not be liable to anyone for anything done, omitted or suffered in good faith
by
the Escrow Agent based on such advice. The Escrow Agent shall not be required
to
take any action hereunder involving any expense unless the payment of such
expense is made or provided for in a manner reasonably satisfactory to it.
In no
event shall the Escrow Agent be liable for indirect, punitive, special or
consequential damages.
3
The
Parent and the Indemnifying Stockholders agree to indemnify the Escrow Agent
for, and hold it harmless against, any loss, liability or expense incurred
without gross negligence or willful misconduct on the part of Escrow Agent,
arising out of or in connection with its carrying out of its duties hereunder.
The Parent, on the one hand, and the Indemnifying Stockholders, on the other
hand, shall each be liable for one-half of such amounts.
Liability
and Authority of Indemnification Representatives; Successors and
Assignees.
The
Indemnification Representative shall not incur any liability to the Indemnifying
Stockholders with respect to any action taken or suffered by him in reliance
upon any note, direction, instruction, consent, statement or other documents
believed by him to be genuinely and duly authorized, nor for other action or
inaction except his own willful misconduct or gross negligence. The
Indemnification Representative may, in all questions arising under this
Agreement, rely on the advice of counsel and the Indemnification Representative
shall not be liable to the Indemnifying Stockholders for anything done, omitted
or suffered in good faith by the Indemnification Representative based on such
advice.
In
the
event of the death or permanent disability of the Indemnification
Representative, or his resignation as an Indemnification Representative, a
successor Indemnification Representative shall be elected by a majority vote
of
the Indemnifying Stockholders, with each such Indemnifying Stockholder (or
his,
her or its successors or assigns) to be given a vote equal to the number of
votes represented by the shares of stock of the Company held by such
Indemnifying Stockholder immediately prior to the effective time of the share
purchase under the Merger Agreement. Each successor Indemnification
Representative shall have all of the power, authority, rights and privileges
conferred by this Agreement upon the original Indemnification Representative,
and the term “Indemnification Representative” as used herein shall be deemed to
include each successor Indemnification Representative.
The
Indemnification Representative shall have full power and authority to represent
the Indemnifying Stockholders, and their successors, with respect to all matters
arising under this Agreement and Article 6 of the Merger Agreement and all
actions taken by the Indemnification Representative hereunder or under Article
6
of the Merger Agreement shall be binding upon the Indemnifying Stockholders,
and
their successors, as if expressly confirmed and ratified in writing by each
of
them. Without limiting the generality of the foregoing, the Indemnification
Representative shall have full power and authority to interpret all of the
terms
and provisions of this Agreement, to compromise any claims asserted hereunder
and to authorize any release of the Escrow Shares to be made with respect
thereto, on behalf of the Indemnifying Stockholders and their successors.
The
Escrow Agent may rely on the Indemnification Representative as the exclusive
agent of the Indemnifying Stockholders under this Agreement and shall incur
no
liability to any party with respect to any action taken or suffered by it in
good faith reliance thereon.
4
Amounts
Payable by Indemnifying Stockholders.
The
amounts payable by the Indemnifying Stockholders to the Escrow Agent under
this
Agreement (i.e., the indemnification obligations pursuant to Section 6(b))
shall be payable solely as follows. The Escrow Agent shall notify the
Indemnification Representative of any such amount payable by the Indemnifying
Stockholders as soon as it becomes aware that any such amount is payable, with
a
copy of such notice to the Parent. On the sixth business day after the delivery
of such notice, the Escrow Agent shall sell such number of Escrow Shares (up
to
the number of Escrow Shares then available in the Escrow Account), subject
to
compliance with all applicable securities laws, as is necessary to raise such
amount, and shall be entitled to apply the proceeds of such sale in satisfaction
of such indemnification obligations of the Indemnifying Stockholders; provided
that if the Parent delivers to the Escrow Agent (with a copy to the
Indemnification Representative), within five business days after delivery of
such notice by the Indemnification Representative, a written notice contesting
the legitimacy or reasonableness of such amount, then the Escrow Agent shall
not
sell Escrow Shares to raise the disputed portion of such claimed amount except
in accordance with the terms of clauses (i) or (ii) of
Section 3(a).
Termination.
This
Agreement shall terminate upon the distribution by the Escrow Agent of all
of
the Escrow Shares in accordance with this Agreement; provided that the
provisions of Sections 6 and 7 shall survive such termination.
Notices.
All
notices, instructions and other communications given hereunder or in connection
herewith shall be in writing. Any such notice, instruction or communication
shall be sent either (i) by registered or certified mail, return receipt
requested, postage prepaid, or (ii) via a reputable nationwide overnight
courier service, in each case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been delivered five
business days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one business day after it is sent via a reputable
nationwide overnight courier service.
If
to the
Parent:
Single
Touch Systems Inc.
0000
Xxxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxxxx, President
with
a
copy to (which shall not constitute notice hereunder):
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxx Xxxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to the
Indemnification Representatives:
Xxxxxxx
X. Xxxxxx, Esq.
c/o
Single Touch Interactive, Inc.
5
0000
Xxxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxxx,
XX 00000
Facsimile:
760.438.1793
If
to the
Escrow Agent:
Gottbetter
& Partners, LLP
000
Xxxxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxx X. Xxxxxxxxxx, Esq.
Facsimile:
(000) 000-0000
Any
party
may give any notice, instruction or communication in connection with this
Agreement using any other means (including personal delivery, telecopy or
ordinary mail), but no such notice, instruction or communication shall be deemed
to have been delivered unless and until it is actually received by the party
to
whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this
Section 10.
Successor
Escrow Agent.
In the
event the Escrow Agent becomes unavailable or unwilling to continue in its
capacity herewith, the Escrow Agent may resign and be discharged from its duties
or obligations hereunder by delivering a resignation to the parties to this
Escrow Agreement, not less than 30 days prior to the date when such
resignation shall take effect. The Parent may appoint a successor Escrow Agent
without the consent of the Indemnification Representatives so long as such
successor is a chartered bank and may appoint any other successor Escrow Agent
with the consent of the Indemnification Representative, which shall not be
unreasonably withheld. If, within such notice period, the Parent provides to
the
Escrow Agent written instructions with respect to the appointment of a successor
Escrow Agent and directions for the transfer of any Escrow Shares then held
by
the Escrow Agent to such successor, the Escrow Agent shall act in accordance
with such instructions and promptly transfer such Escrow Shares to such
designated successor. If no successor Escrow Agent is named as provided in
this
Section 11 prior to the date on which the resignation of the Escrow Agent is
to
properly take effect, the Escrow Agent may apply to a court of competent
jurisdiction for appointment of a successor Escrow Agent.
General.
Governing
Law; Assigns.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of New York without regard to conflict-of-law principles
and
shall be binding upon, and inure to the benefit of, the parties hereto and
their
respective successors and assigns.
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
6
Entire
Agreement.
Except
for those provisions of the Merger Agreement referenced herein, this Agreement
constitutes the entire understanding and agreement of the parties with respect
to the subject matter of this Agreement and supersedes all prior agreements
or
understandings, written or oral, between the parties with respect to the subject
matter hereof.
Waivers.
No
waiver by any party hereto of any condition or of any breach of any provision
of
this Agreement shall be effective unless in writing. No waiver by any party
of
any such condition or breach, in any one instance, shall be deemed to be a
further or continuing waiver of any such condition or breach or a waiver of
any
other condition or breach of any other provision contained herein.
Amendment.
This
Agreement may be amended only with the written consent of the Parent, the Escrow
Agent and the Indemnification Representative.
Consent
to Jurisdiction and Service.
The
parties hereby absolutely and irrevocably consent and submit to the jurisdiction
of the courts in the State of New York and of any federal court located in
the
State of New York in connection with any actions or proceedings brought against
any party hereto by the Escrow Agent arising out of or relating to this
Agreement. In any such action or proceeding, the parties hereby absolutely
and
irrevocably waive personal service of any summons, complaint, declaration or
other process and hereby absolutely and irrevocably agree that the service
thereof may be made by certified or registered first-class mail directed to
such
party, at their respective addresses in accordance with Section 10
hereof.
Acknowledgement
and Waiver of Conflict.
The
parties hereby acknowledge that the Escrow Agent has represented the Parent
in
connection with the Merger. The Parent and the Indemnification Representatives
hereby waive any conflict of interest arising by virtue of the Escrow Agent’s
representation of the Parent, and hereby agree to acknowledge and approve the
taking of any action by the Escrow Agent reasonably necessary to protect and
preserve its rights under this Agreement.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
7
IN
WITNESS WHEREOF, the parties have duly executed this Escrow Agreement as of
the
day and year first above written.
|
SINGLE
TOUCH SYSTEMS INC.
|
||
| By: |
/s/ Xxxxx
Xxxxxx
|
|
| Name: |
Xxxxx
Xxxxxx
|
|
| Title: |
President
|
|
|
/s/ Xxxxxxx Xxxxxx
|
||
| Xxxxxxx Xxxxxx, in his capacity as the Indemnification Representative | ||
| GOTTBETTER & PARTNERS, LLP | ||
| By: |
/s/
Xxxx X. Xxxxxxxxxx
|
|
| Name: |
Xxxx
X. Xxxxxxxxxx, Esq.
|
|
| Title: |
Partner
|
|
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